Saving Sony, one console at a time

For a company with almost $64 billion in annual sales, Sony Corp. has an awful lot at stake with the launch of its latest game console.

No doubt, there will be lines of hardcore gamers waiting outside retailers across the country late Thursday night, and all expectations are that every PS3 available will be sold before Christmas. That certainly would be good news for Sony, a company that could use a dose of holiday cheer.

Simply put, the PS3 is about more than just gaming for Sony: It's about selling high-definition DVDs and televisions. It's about making investments in cutting-edge technologies pay off. Most of all, it's about improving a once-admired brand that's been badly tarnished over the past year by the recall of hundreds of thousands of laptop batteries, the controversial installation of so-called rootkit software on music CDs, and a government investigation into the company's static random-access memory (SRAM) business.

"They've been kind of beaten down by all the different things going on," said Adrienne Downey, a senior analyst with Semico. "They've really been hoping that the PS3 would be a turning point for the company. If they can get a successful launch of the PS3, they can begin to rebuild mindshare among consumers who were beginning to think that the Sony brand is not what it used to be."

For more than a decade, Sony has dominated the game console business. Between its original PlayStation, which launched in 1994, and its PlayStation 2, which arrived in 2000, Sony has sold well more than 200 million consoles and overtaken the previous leader, Nintendo.

"The PS3 is hugely important for the company right now," said Richard Shim, a senior analyst with IDC. "They're reeling from a series of events [and the PlayStation] has really been the go-to product for them for the last few years."

Holding on to the game console market won't be a cakewalk. Sony has to contend with Microsoft--whose own next-generation console, the Xbox 360, has been on the market for a year and which has already sold more than 6 million units--as well as with Nintendo, which is launching the much-hyped and well-regarded Wii early Sunday morning.

The PS3 is seen in many circles as a technological marvel with stunning graphics, a motion-sensitive controller, a Blu-ray player, and impressive networking capabilities. But the console has also been beset by its own set of blunders--release delays, problems with its blue diode lasers, compatibility issues with older games, and expected supply shortages that could last until spring.

And some worry that its price--$599 for a top-end model--is too high to appeal to a wide audience, even as Sony has had to subsidize the machine's $800 manufacturing price tag. Like Microsoft, Sony is willing to lose money on the console with the hope of making it up on games sales.

There's little doubt that the PS3 will sell like gangbusters in the early going. But the question remains as to how it will sell in the long haul. Some believe it is well-positioned to ultimately win the console war with Microsoft and Nintendo due to intense brand loyalty from video game players and due to new technology.

But if it doesn't live up to expectations, the PS3 could put a real hurt on several other elements of Sony's overall strategy.

First, the company is counting on the PS3 to put Blu-ray players in millions of households and drive sales of Blu-ray movies and other content. Some even think that Blu-ray buyers may choose PS3s because its price is significantly lower than standalone Blu-ray players are expected to be.

"The PS3 is critically important to the future of Blu-ray," Semico's Downey said. "Sony's been betting on the PS3 to launch Blu-ray for some time now, so they're really hoping [it] will sell well and take off and get Blu-ray into all those households."

If the PS3 doesn't sell well, "would Blu-ray still win?" asked Ted Schadler, an analyst with Forrester Research who has predicted the format's ultimate victory over the competing HD DVD. "My bet is that it would. But it would be a slower victory. The PS3 is like an accelerant [for Blu-ray], like gasoline on the fire. It could delay the clear winner [of the Blu-ray/HD DVD war] by a year if this thing bombs in the market."

Similarly, Sony and partners IBM and Toshiba have invested hundreds of millions of dollars in the creation of the Cell processor, the PS3's brain. Some industry watchers believe that the investment is riding on the console's success.

That said, Tony Massimini, chief of technology at the analyst firm Semico, said he sees the importance of the PS3 to the processor and the infrastructure but believes that the companies behind the Cell will push it regardless of PS3's fortunes.

"Initially, the PS3 is important. But in the long term, it's [just] one of several markets," said Massimini, referring to high-definition video equipment and other products that can use the Cell. "I don't think it would necessarily [be a problem] for the Cell [if the PS3 fails]. Too much has been put into it."

Sony also hopes the PS3 can play a big role in the digital living room.

Richard Doherty, president of the analyst firm Envisioneering, said the PS3, which ships with high-speed, gigabit capability, could be the device that enables consumers to bring in all manner of multimedia content to their homes for years to come, much of which Sony will surely try to sell directly or at least get some revenue from.

Sony acknowledges the importance of the PS3 to its future. "I think we've [the PlayStation group] contributed up to half of the bottom line profits to Sony," said Jack Tretton, vice president of sales and marketing for Sony Computer Entertainment America. "We're a key pillar in the Sony strategy. [But] with that comes a lot of expectation and a lot of pressure."

The console could have a big effect on sales of Sony high-definition TVs, Sony's movies on Blu-ray DVDs, and the company's music library, he said.

"In the past, we were in the gaming business, and the gaming business had very loose ties, if any, to other [Sony] divisions," Tretton said. "With PS3, we have very direct ties."

Ultimately, Sony has great hopes for the PS3. But the ragged lead-up to the product launch early Friday morning has reminded many of how much the electronics giant has riding on this release.

Sony's "legacy is that they're an engineering company, and that's what they hang their hat on," Shim said. "So if they're unable to put out a product that doesn't have bugs, then that hits them right in the heart of their competency."

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Discussion

172 comments
_Sam_
_Sam_

I think that the ps3 will do better down the line. Right now there aren't a lot and it's too expensive for some

chibirevolution
chibirevolution

Sony pinning all their hopes on this machine eh? What happens if blu ray fails? I'm stuck with a $600 obsolete movie player right? All i want to do is play games. But at this price i think there are cheaper and better alternatives. Xbox360 is more established with a better networking medium. Plus it can produce similar games and graphics to a PS3. The Nintendo Wii just looks like a hell load of fun compared to the other two consoles. Is there a reason left to buy a PS3 (other than falling for all the hype at launch)? Sorry to sound so negative with Sony. But i really think they have a big battle ahead of them.

Seraphim_24
Seraphim_24

Let's get the scaling issue fixed then I'll worry about buying one. I'm not slapping down $600 for a console my TV can't get the most out of. Come on if the 360 can scale why can't the PS3?

ragin_massaih
ragin_massaih

Why is this news?? DOWN DOWN DOWN with Sony tho! lol

PiMacleod_basic
PiMacleod_basic

we'll see how it's doing in a year. for now, keep doing what you're doing.

cjcr_alexandru
cjcr_alexandru

So the PS3 is very important for Sony. I knew that.

GrimBee
GrimBee

Strange, the wii games are having better reviews than ps3 games!!

kenesu96
kenesu96

i cant believe the fights that hapeen over graphical power. systems available since 1993 hv\ave been capable of 16.7 million colors! maxing out the TV! thres no need for an 'arms' race in horepower anymore. but i dont think that ifthe PS3 fails sony will go under overnight, but how would the restructure IF such a thing would happen. but the korean and chinese TV market plus the battle against HD DVD, losing to the i-pod , the movie division teetering and the recals. etc. it does have to sell big. personally, i dont even think FF XIII will put my butt in the seats at this point. only of it were 300$ and had at least 10 games wirth it, that i could find used. lets just say the high price tage ensures a healthy mix of the rich and ignorant! the last console priced around that high, (the 3do) well....

nhlkoho
nhlkoho

there aren't any "must have" games for the PS3 out right now that would make most people go out and buy one. And plus the tv's that support 1080p are wayyyyyyy to expensive still so I highly doubt the average joe is gonna go out and spend $600 on a console and then go spend another $4-5k on a tv that can display the picture properly. In my opinion, Sony already lost this war. Nintendo has the right idea as usual.

justagrouch
justagrouch

High price, one good game. The only way it can succeed in this competitive and soon to be even more competitive, in less than 48 hours, market is in the long run. It will do alright in the short-run but if Sony is going to gain the lead they have had for the last two generations it won't be until a price drop or an extreme devaluation of the dollar that so $600 is equal to 300 current $s.

TooDamnRaw
TooDamnRaw

[Quote]Sony's "legacy is that they're an engineering company, and that's what they hang their hat on," Shim said. "So if they're unable to put out a product that doesn't have bugs, then that hits them right in the heart of their competency."[/Quote] That whole statement pretty much sums it up for me. Sony is more interested in the hardware that they forget that software sells systems now. Microsoft and Nintendo are known for having good software, so that could be a problem for Sony in the long run.

matrixman2k
matrixman2k

I will wait till they redesign the thing - it looks hideously bulky...Maybe like the cute looking slimline ps2. I don't know but i'm starting to like electronics that are small like ipod nano. Hmmm maybe i'm picking up some japanese influences, possibly.

rikardo10
rikardo10

sony`s mistake was to put blu-ray instead of hd.dvd, the console would have been at least i dont know, maybe 100$ less than its actual price.

Prince_jeffery
Prince_jeffery

Though its highly improbable that I'll buy a PS3, I still wish Sony luck in the market.

vercetti_dude2
vercetti_dude2

I believe that PS3 sales will increase in the long run. I'm just itching to buy one, and would probably have one if not for the ridiculously high price. (and the lack of good games currently also deterred me)

bong9bs
bong9bs

if sony wants to win this console war, they better ship more units before christmas.... im sitting at home eating banana and i pretty much doubt that i will get ps3 in the morning... hopefully, sony ships out more ps3... its on their hands

getoconnection
getoconnection

Well some what. It's a huge cycle that we keep shelling out more and more money for. Say what you want but I didn't have to pay more between my nes snes and n64. Now nintendo is even in on the act. At least the price of the games went down between the N64 and the Cube. Microtransactions! WTF! I got a gang of Nintendo products. I should get some of those ROMs free with those serial code as a thank you.

Airek49
Airek49

getoconnection There is no way to tell at this point that Microsoft would have moved to a bigger and better tech. Also, the math isn't there. Two generations of XBOX for the price of PS3? Sorry, but the 360 isn't that much cheaper than the PS3 as it is.

GranTurismo_559
GranTurismo_559

I hope Sony knows what that are doing, In the end I think that Sony will pull this one out

getoconnection
getoconnection

Airek49 By that time Microsoft would have moved on to a bigger and better tech. And the way the price goes down for everything I would have paid the same amount of money for 2 gens of XBOX as PS3 fans paid for one, only I would have made off with the bigger and better graphics in the end. Unless Sony doesn't stick to the 10 year plan, then we'll see another PS following a new Xbox. Which is exactly why Nintendo stayed out of this mess.

Gmacrusher
Gmacrusher

Well good for them and good for the gamers because if they win we all win

Airek49
Airek49

getoconnection - Yes, they would. Never said anything about it being maxed out. But... when they ARE both maxed out, and pushed to the limit, based on the hardware specs, the PS3 should pass the 360 as far as graphics and performance goes. This has nothing to do with gameplay or the quality of the games. Only time will as far as that goes, and this is purely looking at the hardware. legs1986 - That's a good point, and I agree with you about the multiplatform games. Exclusives are what define a system as a whole, though. People don't buy a 360 or PS3 for CoD3 or Tony Hawk. They buy it for Halo/MGS series.

getoconnection
getoconnection

Airek49 By the same token would they not have learned how to better program for the 360? Saying that the 360 is maxed out already is stupid.

legs1986
legs1986

One problem with your points Airek. The PS3, while just now launching, has had final hardware specifications (for the most part) set for over a year and a half. Multiplatform games will not look better, because while the PS3 has the ability to look marginally better (10-15%), developers making games multiplatform are not going to take the extra time and money to take advantage of that small percentage; they're just going to get their games out there. As far as exclusives, I wholeheartedly expect them to put the effort into it.

Airek49
Airek49

Ok, apparently I'm not making myself clear. I'll try to lay it out as simple as possible. XBOX360 has been out for a year now (have I lost you yet? good, let's continue). In that year its hardware has been learned by game developers. (this means they know its capabilities and how to take advantage) In one year from now, when PS3 is in the same boat (by this, I mean its hardware is well learned, as I stated above with the 360) it will be better graphically. Look at the specs again. #1 - 360 Launched a year ago. #2 - 360 Hardware is well learned #3 - PS3 is brand new, capabilities not fully known yet. #4 - In a year, check multiplatform games again. PS3 will be superior. If you can't understand this... then... simply.. wow.

vaejas
vaejas

What exactly is "impressive networking capabilities"? Does it connect to other computers? Does it download and stream stuff? More to the point, I think, is that the raw computing power is expanding what a "console" can do, but I'm already past considering the PS3 as a mere game console, any more than a Blackberry is a phone. "Yes, but also..." Sony's made a nice shiny computator. Distributed computing to fight disease? Good 'un. Can I slap Linux on there? You betcha. 40 player deathmatch? Gutsy, but I've got way more than 40 torrent peers connected right now. More like "intriguing networked potential" I'd say.

GOLIATHtheGREAT
GOLIATHtheGREAT

"Airek48 said "You called yourself a major gamer, but obviously have no clue as of what you're talking about. You're telling me the system that has been out for a year has better graphics on a multi platform title? No way. The same system that's technology has had time to be learned? The facts are there, PS3's hardware is simply more powerful. Once game designers have a full year to toy around with the PS3 programming, you will be the true beginning of next generation. Until then, don't post any more. Ever." Alright, first of all, until you have had hands on experience with Call of Duty 3 on the 360 and the PS3(Highly doubtful seeing as the PS3 has yet to be released), then you have no right to say with is better. Secondly, saying the PS3 will be the true beginning of the next generation is false, being that the next generation of gaming began last year when the 360 came out. Thirdly, work on your typing. "...you will be the true beginning of the next generation."- I don't think a person can "be" the next generation. And lastly, you have no right to say if anyone can post or not." Well here's something you might like to know. They have been able to compare 2 games on the 360 and PS3. And that game is Ridge Racer 6 and 7. For the most part it's same game same code just new name......and guess what....The 360 graphically surpassed in ever measure except in real-time lighting. Also in the New Tony Hawk for PS3 which I've played stutters and has no water effects and suffers from slowdown problems. I'm not trying to be biased, just trying to tell the truth.

Airek49
Airek49

darkestlight7... You lose. "Alright, first of all, until you have had hands on experience with Call of Duty 3 on the 360 and the PS3(Highly doubtful seeing as the PS3 has yet to be released) #1 - I never said one or the other was better. "then you have no right to say with is better." #2 - I have the right to say whatever I want. #3 - Classic. You tell someone to work on their typing skills, and in turn fumble a sentence of your own. I don't have the right to say WITH is better? You, sir, are an idiot. Thanks for playing.

darkestlight7
darkestlight7

Murpheus007 said "...Microsoft is making a profit on each system sold." If you had read previous Gamespot articles, then you would know that the Wii is the only next generation system that is actually making money. And even if Microsoft was making money for each system sold, how can you criticize a company for using basic economics?

standcm12
standcm12

i got one thing from this article, sony has really huge balls, they are putting out a machine with a huge risk of failure, in a division that contributes half of sony's profit.

darkestlight7
darkestlight7

Airek48 said "You called yourself a major gamer, but obviously have no clue as of what you're talking about. You're telling me the system that has been out for a year has better graphics on a multi platform title? No way. The same system that's technology has had time to be learned? The facts are there, PS3's hardware is simply more powerful. Once game designers have a full year to toy around with the PS3 programming, you will be the true beginning of next generation. Until then, don't post any more. Ever." Alright, first of all, until you have had hands on experience with Call of Duty 3 on the 360 and the PS3(Highly doubtful seeing as the PS3 has yet to be released), then you have no right to say with is better. Secondly, saying the PS3 will be the true beginning of the next generation is false, being that the next generation of gaming began last year when the 360 came out. Thirdly, work on your typing. "...you will be the true beginning of the next generation."- I don't think a person can "be" the next generation. And lastly, you have no right to say if anyone can post or not.

kyosukeugc
kyosukeugc

One thing to say to those who complain on Graphics right now ------ Final Fantasy X was the game that changed the PS2 - expect a similar game within a year of PS3 being out. It's all about having time to play!

Airek49
Airek49

killergun said "Sony boasts that there system has better graphics than the 360. All the visuals look the same to me. If you sony fanboys look at the reviews for some of the games like Call of Duty 3 the 360 scored higher than the PS3 version." You called yourself a major gamer, but obviously have no clue as of what you're talking about. You're telling me the system that has been out for a year has better graphics on a multi platform title? No way. The same system that's technology has had time to be learned? The facts are there, PS3's hardware is simply more powerful. Once game designers have a full year to toy around with the PS3 programming, you will be the true beginning of next generation. Until then, don't post any more. Ever.

KirbyLink
KirbyLink

Personally, I'm a Wii guy, just because of the games, and cost-effectiveness, and my lack of necessity for graphics and HD. But I don't press my view on others, simply because there's no need to. In this case, I would have liked to see PS3 with a core system without Blu-ray and a premium system with it. It would show whether people actually want or do not want the Blu-ray DVD player in it. Last note: While "cheering on" your console is healthy in my opinion, downplaying the other consoles is something that just doesn't make sense. After all, without competition, there is no excellence. I'm hoping none of the consoles go down entirely.

killergun
killergun

I'm a major gamer, so far i have all the consles that have been out including Playstions. But in the last year Sony has disappointed me alot and i wont be getting PS3. Sony boasts that there system has better graphics than the 360. All the visuals look the same to me. If you sony fanboys look at the reviews for some of the games like Call of Duty 3 the 360 scored higher than the PS3 version. So please stop saying the graphics are superior becuae Killzone looks nothing like its E3 2005 trailer neither does Metal Gear Solid. Sony fabricated those trailers, real time my ass. Oh and to the people out there thinking Blue-ray is winning right you'r wrong get your facts straight and do your homework. HD-DVD is out selling Blue-ray right now.

xangel0884
xangel0884

I hate to think that some gamers are dumb and fools. Some people who says "i cant wait for my pS3" knows nothing about PS3. Its all about the hype. On their puny minds for them PS3 is more powerful than XBOX 360-what a crap! Real GAMERS reads news, reviews and UNBIASED opinions on next generation consoles before buying them. Sony is smart and cruel - they have used their brand to sell PS3 even they know about the risks and problem that may/will occur ex. PS1 and PS2 games 100% compatible - my arse- Waiting for an update- when? is it gonna work? What a lie! I dont trust SOny at all. Most of the PS3 features and info are vague and fabricated. Fact: Most/ some gamers are stupid. I dont want to be one. I will get unbiased reviews/opinions first before buying PS3- the so called next generation bugs i mean console. DO RESEARCH on GOOGLE and you will what i mean.

Murpheus007
Murpheus007

This is an article I pulled. I know I said I wouldn't say anything else, but this was too good. Anyone still think the PS3 is overpriced? The full production cost for a 20GB system is a whopping $805.85, with the 60 GB coming in at $840.35. Chief among the expenses are the RSX graphics chip at $129 and the Blu-Ray optical drive at $125. In contrast, the $400 Xbox 360 only costs $323.30. For the first time in its five-year console publishing history, Microsoft is making a profit on each system sold. For those wondering about retailers, it should be noted that stores make almost no money selling consoles. Retailers such as EB Games and Wal-Mart make money on software and peripheral sales. The steep cost of producing PS3s won't last forever. In general, the longer an item is produced, the cheaper it becomes to manufacture. Over time, the cost of the PS3 will get lower as the cost of parts gets cheaper and production becomes more efficient. That doesn't guarantee Sony will ever make a profit on selling the system alone, but it can still bank on earning a hefty paycheck from software sales and digital downloads. The bottom line is that no matter what it costs Sony to make one, you only have to pay $600 to own it. In that sense, you're getting a hell of a bargain when you purchase a PS3. Oh, and is Microsoft giving a break to it's future 360 owners? I don't think so.

killerd04
killerd04

I'm a major gamer, so far i have all the consles that have been out including Playstions. But in the last year Sony has disappointed me alot and i wont be getting PS3. Sony boasts that there system has better graphics than the 360. All the visuals look the same to me. If you sony fanboys look at the reviews for some of the games like Call of Duty 3 the 360 scored higher than the PS3 version. So please stop saying the graphics are superior becuae Killzone looks nothing like its E3 2005 trailer neither does Metal Gear Solid. Sony fabricated those trailers, real time my ass. Oh and to the people out there thinking Blue-ray is winning right you'r wrong get your facts straight and do your homework. HD-DVD is out selling Blue-ray right now.

MrZentropa
MrZentropa

Sony has lost their innovative edge... all they seem concerned with these days is ramming their proprietary media down people's throats. The PS3 is clearly more about Blue Ray than gaming. It's not a gaming machine anymore, it's everything but... it's a media monopoly device, it's a way to sell HDTVs and music. Who want's to pay $500/600 for a console that doesn't even come with the cables necessary for an HD format that will probably go the way of Betamax!

chickmagnet_1
chickmagnet_1

Why be so loyal to a company who overcharges for their equipment? They tell you that it costs so much to produce, but does it really? I find it hard to believe that it costs Sony $800 to produce a PS3, bullcrap. This company is great for fudging with the numbers and getting its hardcore fans to believe what they want them to believe. I have a PS2, so I am not like a Nintendo fanboy or anything. Truth to the matter is, I have seen Sony fans swallow up every piece of info. like it is fact. Sony could tell them that the sky is falling, and they would believe it. Sony is starting to seem very shady. I do not find this with Nintendo (not really Microsoft either) It seems like the people at Nintendo have remained pretty honest the whole way through, and I respect that. And on the same note, at least they are not trying to empty their customers wallets. With Sony's pricing and problematic equipment, they are just going to leave their fans with a bad taste in their mouth. Sony was wonderful up to the PS2, after that, I lost a lot of respect for them as a company. After the PS2, I could care less if they fail.

MGSFan27285
MGSFan27285

i dont knwo about you guys but im getting th ps3 at launch tomorrow. the 360 has had too many problems and still has one (overheating) and the ps3s more powerful and has more featres and as mentioned above, is cheaper than normal blu-ray standalones, so its a better deal overall. the wii however, i hope doesn't do well, why? cause im an a$$ and its a gamecube with AA and a new annoying controller. $600 is ok for me to spend on this cause itll have some great games just like the ps2. i might get a 360 later on when the price drops and hopfully the overheating is gone.

puppiemaster
puppiemaster

Sony wont fail, just as many people love them as those that hate them. No doubt I'll end up with all 3 consoles, like most hardcore gamers, those that dismiss a system because of a company as idiots, its all about the games

8bitantichrist
8bitantichrist

I remember reading in Wired about how Sony's future is heavily reliant on the PS3. The millions spent on UMD development, the lawsuits from the rootkit problem, and sagging profits in it's home entertainment division had them in the red for a while now. (Throwing out sales figures for the PS2 is pointless, its not like Sony still has all that money, fanboys.) Personally, it's a little vindicating to see this article after all of Kaz Hirai's bragging about how Sony is unconcerned about their competition, as that itself is contradictory to one of the chief rules in business. If the PS3 fails, Sony will be in trouble, but as for bankruptcy, we'll have to wait and see.

the-very-best
the-very-best

Sony's a smart company. I have no doubt they'll recover from their mistakes in the past. Every company has a rough time at one point. And with the great games coming to the PS3 I'm sure Sony will be back on its feet in no time.

Zeke129
Zeke129

I hate to say it Gamespot, but please post some REAL news.

CommanderShiro
CommanderShiro

I love the comments from all you fanboys. Personally, when I have the money I'm getting both a Wii and PS3. I never took a side when it comes to the system wars. The only thing that truely matters is if you have a good time with the product.

Robacon1
Robacon1

So, you guys do realize that the 360 is also now 1080p capable, right? Do you really think MS would do that if there weren't any other makers of 1080p capable tvs, do you?